Construction output slows

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The total volume of construction output in the first quarter of 2012 increased by 1.3% compared to the same period in 2011.

Output has also shown quarter-on-quarter growth over the last three quarters.

But the current levels of output are still around 40% lower than peak output in 2007.

The industry had been stuck in a deep depression after the bursting of a property price bubble led to four years of falling output.

Thousands of jobs have been lost in the sector and a significant number of firms have gone out of business.

Most of the big construction firms have had to refocus on markets outside Northern Ireland and profits margins have been squeezed by intense competition.

The Northern Ireland Statistics and Research, NISRA, which produces the figures, said that while the increases in output over the previous two quarters were relatively small, the latest increase is much larger.

It said total output is approximately £30m more than the last quarter of 2011.

Although many large state projects are said to influence the rise in output.

Surveys have revealed that consruction firms are worse of than expected as statistics collected from companies house revealed.

This leaves a huge swathe of the industry in an extremely vulnerable position, having to count on full backing of the banks.

Profits are falling fast among contractors turning over £2m-£25m, and the accountants predict one in 39 of these firms are likely to fall into financial distress over the next 12 months.

Almost one-quarter of construction contractors saw pre-tax profit plummet by half or more during 2011, with 41% recording a fall of between 10-20%.

It was a similar story for sub-contractors, where 25% saw profitability collapse by more than 50%, and 38% saw a fall of between 10-20%.

The picture was better for sales with just over a quarter of firms reporting sales declines of at least 10% last year compared to around 40% of firms the year before.

“The fact that profits are falling at a faster rate than sales suggests that companies are being hit hard by a double whammy of rising costs and falling margins, as they face an ever more desperate fight for sales,” said Mark Wilson, partner at Baker Tilly Restructuring and Recovery.

“Cutting margins to the bone might win more work in the short term, but it is very risky and in the long term it is counter-productive, as shown by the drastic fall in profit levels.”

Source construction enquirer